Thursday, January 22, 2009

Education, Part 3: Education and Economic Growth

I am trying to find the time to give this outstanding book its due: "The Race Between Education and Technology" by Harvard economists Claudia Goldin and Larry Katz. Unfortunately, I am not done with it and the library (or more accurately Eastern Washington University's library) wants it back. So I have finally decided to spend the money and order it. As I await the arrival of my own copy, I can talk about the parts that I have read carefully. I did one snippet a couple of days ago and here is another one.

Above is a key table that speaks to the relationship between education and growth (is this acceptable fair use - can someone tell me?). This is a growth accounting that looks at increases in educational attainment and their effect on employment and productivity.How to interpret this table? Well, column one is the measure of productivity growth (output per hour) and column two is the change in educational productivity. For column three, I'll let the authors say the punch line: "Thus, education directly contributed an average of 0.34 percentage points a year to to economic growth...[emphasis theirs]" They go on the say that between 1960 and 1980 the contribution of educational advancement to labor productivity growth was 0.59 percent per year but then sharply declined to 0.37 per year. This matches the general observation that there was great advancement in the educational attainment of Americans post WWII, but a steep fall off in the eighties and nineties (as can be seen in column 4).

So, are these numbers big or small? Well, when average growth rates of high income countries are a little above 2%, a bump of 0.34 percentage points is a 17% increase in growth. So these numbers are pretty huge.

What I really want to discuss here at length is their treatment of the future of education and technology and how a state like Oregon should view education as a part of its economic (as opposed to social) strategy. Soon - the taxpayers of Oregon are paying part of my salary not to blog but to teach research and assist in the operation of OSU, and the tuition paying students of OSU are always my top priority. So blogging has to take a back seat.

3 comments:

I think that educational levels clearly contribute to economic growth, and become increasing important as global competition increases. But do not think of our current model or system of education as the most efficient in delivering the needed knowledge and skills. Consider this paragraph from John Robb of Global Guerrillas (see here):

“Education, in its current form is an admixture of industrial and artisan processes. While the quantities of product (graduates) produced and the facilities resemble industrial processes, the actual production is most closely akin to artisanship (with guilds, no less!). Regardless, this process has become an albatross of cost and stagnating quality. For example, costs for collegiate education have increased 4.39 times faster than inflation over the past three decades and has now eclipsed affordability for most households (median incomes have stagnated during this same period) with no appreciable improvement in the quality of graduates. Worse, there is reason to believe that costs of higher education (direct costs and lost income) are now nearly equal (in net present value) to the additional lifetime income derived from having a degree. Since nearly all of the value of an education has been extracted by the producer, to the detriment of the customer, this situation has all the earmarks of a bubble. A bubble that will soon burst as median incomes are adjusted downwards to global norms over the next decade.”

"So what does the twenty first century look like to you? A era where you want to see kids invest in very specific skills ... or knowledge that makes them adaptable and able to change with a changing economy? I prefer the latter."

Or there can be a third option:

Stanley Fish's new book "Save the World On Your Own Time" argues that trying to justify education in terms of economic growth/usefulness is a wasted exercise. At least for those in humanities / liberal arts.

It's just what "scholars do." Like poetry. Or painting. It has its own utility.

I am willing to ignore the humanities and arts education (or assume they are more of a private good) in order to keep a focus on more tangible skills. But I do believe that there is a strong public good aspect to those areas as well.

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This blog seeks to comment on economic issues that matter to the state of Oregon. These issues may be local, state or national but in some way matter to Oregon and Oregonians. The goal of this blog is to eschew politics as much as possible and give an economist's perspective on economics and public policy as it relates to Oregon.

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